Download or read book Modeling Residential Mortgage Termination and Severity Using Loan Level Data written by Ralph Guy DeFranco and published by . This book was released on 2002 with total page 254 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Loss Severity on Residential Mortgages written by Laurie S. Goodman and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this article we analyze new loan-level data recently released by Freddie Mac on more than 17 million single-family mortgages to reveal a range of new and useful insights into the ultimate financial losses associated with a loan after it experiences a credit event. We conclude that mortgage insurance significantly lowers loss severities. We show that actual loss severities are higher than the preset severity schedule for loans with a loan-to-value (LTV) ratio of 60-80, relatively accurate for higher-LTV loans. We also find that small loans have higher severity than larger loans, that real-estate-owned (REO) sales have higher severity than short sales, and that there is no stable relationship between the state of origination and severity. Finally, we review the components of loss -- liquidation value, direct expenses, and lost interest -- and find that direct expenses and loss interest contribute significantly to the ultimate loss.
Download or read book Modeling Residential Mortgage Performance with Random Utility Models written by Carolina Márquez Guerrero and published by . This book was released on 2007 with total page 378 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Loss Given Default of High Loan to value Residential Mortgages written by Min Qi and published by . This book was released on 2007 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies residential mortgage loss given default using a large set of historical loan-level default and recovery data of high loan-to-value mortgages from several private mortgage insurance companies. We show that loss given default can largely be explained by various characteristics associated with the loan, the underlying property, and the default, foreclosure, and settlement process. We find that the current loan-to-value ratio is the single most important determinant. More importantly, mortgage loss severity in distressed housing markets is significantly higher than under normal housing market conditions. Our empirical results have important policy implications for risk-based capital.
Download or read book An Intensity Based Non Parametric Default Model for Residential Mortgage Portfolios written by Jürg Burkhard and published by . This book was released on 2005 with total page 71 pages. Available in PDF, EPUB and Kindle. Book excerpt: In June 2003 Swiss banks held over CHF 500 billion in mortgages. This important segment accounts for about 63% of all loan portfolios of Swiss banks. Since default insurance is not common in Switzerland, the corresponding risks are a severe threat for the health of the financial system. We focus the analysis on portfolios of residential mortgages and model the probability distribution of the number of defaults using a non-parametric approach, where the intensity processes associated to the time-to-default is linked to a set of predictors through general smooth functions: A generalized additive model is used to condition default intensities of mortgages on relevant economic risk drivers. We calibrate our model on a large mortgage servicing data set and compare the resulting loss distributions to a well-known benchmark, i.e. the loss distribution from CreditRisk+ as commonly applied in the industry. The conditional loss distribution and risk measures for a large mortgage portfolio are shown to be greatly sensitive to the prevailing socio-economic scenario. We present evidence that aggregated res- idential mortgage default risk is not only driven by the rating but also by variables such as the loan-to-value ratio, contract age, regional unemployment as well as contract rate changes and the contract type. Hence, it is crucial to integrate the significant factors into any reasonable bank risk, portfolio or capital management framework or approaches for structuring and pricing of related products. We illustrate the severe shortcomings of the unconditional ap- proaches. With our results we are able to contribute significantly to the ongoing international discussion about the drivers of residential mortgage risk as well as to suggestions for improved risk management approaches. Finally, our findings are highly relevant for the implementation of the Basel II accord. Keywords: reduced-form, structural approach, default risk, default intensity, mortgages, generalized additive model, CreditRisk+
Download or read book Subprime Mortgage Credit Derivatives written by Laurie S. Goodman and published by John Wiley & Sons. This book was released on 2008-06-02 with total page 352 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mortgage credit derivatives are a risky business, especially of late. Written by an expert author team of UBS practitioners-Laurie Goodman, Shumin Li, Douglas Lucas, and Thomas Zimmerman-along with Frank Fabozzi of Yale University, Subprime Mortgage Credit Derivatives covers state-of-the-art instruments and strategies for managing a portfolio of mortgage credits in today's volatile climate. Divided into four parts, this book addresses a variety of important topics, including mortgage credit (non-agency, first and second lien), mortgage securitizations (alternate structures and subprime triggers), credit default swaps on mortgage securities (ABX, cash synthetic relationships, CDO credit default swaps), and much more. In addition, the authors outline the origins of the subprime crisis, showing how during the 2004-2006 period, as housing became less affordable, origination standards were stretched-and when home price appreciation then turned to home price depreciation, defaults and delinquencies rose across the board. The recent growth in subprime lending, along with a number of other industry factors, has made the demand for timely knowledge and solutions greater than ever before, and this guide contains the information financial professionals need to succeed in this challenging field.
Download or read book Housing Default written by Allen C. Goodman and published by DIANE Publishing. This book was released on 2010-10 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a national loan level data set, the authors examine loan default as explained by local demographic characteristics and state level legislation that regulates foreclosure procedures and predatory lending through a hierarchical linear model. They observe significant variation in the default rate across states, with lower default levels in states with higher temporal and financial costs to lenders when controlling for loan and location conditions. The results are notable given that many of the observed loans were sold to investors in national and international markets. State level legislative influences provide a foundation for discussion of national level policy that further regulates predatory lending and financial institution foreclosure activities. Charts and tables.
Download or read book The Handbook of Mortgage Backed Securities 7th Edition written by Frank J. Fabozzi and published by Oxford University Press. This book was released on 2016-08-11 with total page 831 pages. Available in PDF, EPUB and Kindle. Book excerpt: This edition of The Handbook of Mortgage-Backed Securities, the first revision following the subprime mortgage crisis, is designed to provide not only the fundamentals of these securities and the investment characteristics that make them attractive to a broad range of investors, but also extensive coverage on the state-of-the-art strategies for capitalizing on the opportunities in this market. The book is intended for both the individual investor and the professional manager. The volume includes contributions from a wide range of experts most of whom have been actively involved in the evolution of the mortgage-backed securities market.
Download or read book Project Jupiter written by Zifeng Lin and published by . This book was released on 2011 with total page 254 pages. Available in PDF, EPUB and Kindle. Book excerpt: As the new Basel Capital Accord (Basel II) was introduced since 2006, banks and other financial institutions are encouraged to calculate their own capital requirements for credit risk under the advanced rating based (A-IRB) approach. In order to be compliant with this approach, financial institutions need to estimate the Loss Given Default (LGD), the credit loss incurred as a fraction of the exposure if the borrower defaults. This paper studies LGD using a large set of historical facility-level default and recovery data of residential mortgages from a major bank in New Zealand. We find that the LGD is highly sensitive to the loan-to-value ratio (LVR), however, the empirical LGDs of each LVR band are significantly lower than the prescribed ones set by the Reserve Bank of New Zealand (RBNZ). The main gap is the regulator's model did not take into account of the fact that a portion of defaulted accounts would go back in order, while the empirical model has incorporated this fact. We also quantify the potential impact of mortgage loss severity in distressed housing markets, comparing to normal housing market conditions. We also find that the level of the change of the property value significantly affect LGD. These findings have important policy implications for several key issues in Basel II implementation.
Download or read book Dissertation Abstracts International written by and published by . This book was released on 2003 with total page 556 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Characteristics of Mortgage Terminations written by Hoon Cho and published by . This book was released on 2016 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: To valuate mortgage-backed securities, it is crucial to understand mortgage termination behavior. Analyzing the unique loan-level dataset, this study examines the characteristics of mortgage prepayment and default behavior in the Korean housing and housing finance markets. We find that loans to individuals with unhealthy financial characteristics -- for example, a high loan-to-value ratio, a high debt-to-income ratio, a lower credit rate, or a high excess premium -- have a higher prepayment risk in the Korean market, which contrasts with the findings on developed markets. The results of subsample tests across regions, loan purposes, and periods indicate that the prepayment risk in a high median price-to-income ratio region is sensitive to mortgage rates, whereas the prepayment risk in a low median price-to-income ratio region is sensitive to housing prices. Mortgages for purposes other than purchase or refinance are less sensitive to financial benefits in prepayment decisions. Prepayment and default behaviors have also changed over time.
Download or read book Stress Testing and Calibration of Macroprudential Policy Tools written by Lucyna Gornicka and published by . This book was released on 2020-08-14 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: We present a semi-structural model of default risk, which is a function of loan and borrower characteristics, economic conditions, and the regulatory environment. We use this model to simulate bank credit losses for stress-testing purposes and to calibrate borrower-based macroprudential tools. The proposed approach is very flexible and is particularly useful when there is limited history of crisis episodes, when crises bring unanticipated shocks where past tail events offer little guidance and when structural shocks or changes in financial regulations have altered the loan default process. We apply the model to quantify mortgage lending risk in two distinct mortgage markets. For each application, we show a range of modeling adjustments that can be made to capture country-specific institutional features. The model uses bank portfolio data broken down by risk bucket and vintage, which enables us to take explicit account of the loan life cycle and to incorporate the housing and economic cycles. This feature facilitates a timely assessment of banks' loss-absorbing capacity and the buildup of systemic risk conditional on policy. It also enables counterfactual analysis and the evaluation of macroprudential policy interventions.
Download or read book Characteristics of Mortgage Terminations written by Hyeongjun Kim and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Understanding mortgage termination behavior is crucial for valuating mortgage-backed securities. Analyzing a unique loan-level dataset, this study examines the characteristics of mortgage prepayment and default behaviors in the Korean housing and housing finance markets. We also analyze mortgage termination behaviors across regions, loan purposes, and periods. The results suggest that the prepayment rate of fixed-rate mortgages (FRMs) and the ratio of adjustable-rate mortgages to FRMs can provide meaningful signals for the Korean household economy. Although the macro-prudential policies pertaining to the loan-to-value ratio (LTV) and debt-to-income ratio (DTI) are very effective, their effects can vary depending on the region or loan purpose. Furthermore, the DTI and credit score cannot always identify the default risks of mortgages are not intended for housing purchases even though such mortgages are more vulnerable to macroeconomic changes. The observed changes in default behavior indicate that the government's policies to promote fixed-rate loans have achieved a certain degree of success.
Download or read book Classification Modeling of Freddie Mac Home Loan Delinquency written by Andrew Peter Hendrickson and published by . This book was released on 2015 with total page 110 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Housing Crisis of the mid 2000s resulted from the irrational exuberance of the ever increasing home prices and the lack of proper verification of income and employment which was standard practice in past home loan approval processing. Models developed to classify home loan delinquency of Freddie Mac data appear to offer substantial improvement, in terms of bank dollars gained, over baseline measures. Past economic research indicated the FICO score as a key variable in home loan delinquency modeling. The FICO score was found to be a key variable for classification models built in this study as well. Other research studies indicated that the riskiness of the borrower pool at the regional level is a factor in keeping a mortgage current (i.e. non-delinquent). For this study, separate data mining analysis was performed for mortgages from Minnesota (MN) and Florida (FL). The regional borrower risk was examined using the FICO score field in relation to the loan delinquency status for both MN and FL sets. For a FICO score range of 500-800, MN had a delinquency rate from 80% to 40% but FL had a delinquency rate from 80% to 20%. The data suggests that an 800 FICO score in FL is less of a loan risk (20% delinquency) than an 800 FICO score in MN (37% delinquency). Due to the coincidence of the mean loan amount requested being approximately equal to the mean loan interest, data driven misclassification costs were not able to be used for this analysis. A simple baseline measure was calculated using holdout test sets for both MN and FL with the Bank of MN loans having a $309,000 loss and the Bank of FL loans having an $8,048,000 loss. Applying this measure to the best classification model delinquency predictions, the Bank of MN loans would have a gain of $215,957,000 and the Bank of FL a gain of $410,015,000.
Download or read book Federal Register written by and published by . This book was released on 1995-02-06 with total page 1016 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Loss Given Default of High Loan To Value Residential Mortgages written by Office of the Comptroller of the Currency and published by CreateSpace. This book was released on 2014-12-31 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies residential mortgage loss given default using a large set of historical loan-level default and recovery data of high loan-to-value mortgages from several private mortgage insurance companies. We show that loss given default can largely be explained by various characteristics associated with the loan, the underlying property, and the default, foreclosure, and settlement process.
Download or read book Housing Price Cycles and Prepayment Rates of U S Mortgage Pools written by Joe P. Mattey and published by . This book was released on 1999 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
